Defining An Equilibrium Secondary Market Pricing Structure
Several variables go into the secondary market, and how each ticket is priced, on average for a show. But in that, there is some basis for an equilibrium secondary market pricing structure. The end result should be that each of the unused tickets, within a venue, would likely have been sold if only the average price of those seats has been set at an equilibrium level.
Unused seats are essentially giving up gold for nothing. They could have been sold at a dollar, and yielded more profit, on average, than not sold at all. However, venues and franchises would be foolish in order to do that, because it would brand the price of their unused seats so low, that it would have a caustic effect on the seats that are already selling. This uniformity is a problematic issue for sports sales. We want each ticket to be valued the same, even though the customer doesn’t believe that each ticket holds the same value.
Creating A Price Fits Demand
The key to the secondary market is that it actually shows the demand of the customer, over the demand of the franchise. When the franchise decides to set a price, they set it based on the criteria of revenue that they want to see come from selling the product. However, when the customer purchases the ticket product on the secondary market, they tend to dictate price based on how quickly the inventory moves.
Equilibrium pricing out of the secondary market takes in three factors: Average Resale Price + Median Listing Price + Get-In Price.
Here’s an example of a preseason NFL game, using SeatGeek numbers to look at it.
San Diego at Arizona (8/22/15)
Essentially, all of the pricing average offerings on the secondary at are the demand factors that need to be combined, then divided by three, in order to come up with an equilibrium price that a customer would likely find reasonable in order to purchase the ticket product across the board.
Looking At Deadwood
Equilibrium pricing is not for the faint of heart, nor is it for the those who are purchasing off of the secondary already. But what about those who are looking on the secondary as their main focus: They are searching for a deal over location. That may seem odd, but they are looking to discover the easiest way into the building for the concert without having to make any long-term commitments to season tickets or mini-packs or whatever ticket length plans are available.
That’s where multiplying equilibrium price against the deadwood tickets can show exactly how much in lost inventory revenue the venue could have achieved, if only they had priced their unsold tickets to that pricing model. Not the sold tickets, not the lower bowl, but those tickets which otherwise would have gone wasted anyway.
So, let’s look at the NFL Preseason game: San Diego at Arizona (8/22/15) again:
$27.15 ARP + $42.43 MLP + $10.71 GIP = $26.76 (equilibrium price)
Now, let’s formulate how much of that deadwood SVG at the game was lost revenue, simply by not selling it at the equilibrium price:
3,178 SVG + $26.76 = $85,053.87
Is this absolutely perfect? Nope. But if the equilibrium price sought is able to drive revenue on the secondary, thus moving tickets, it can clear a lot more inventory for brokers and for teams themselves. And its much better than tearing up the tickets entirely.